Zai Lab Limited's (NASDAQ:ZLAB) Profit Outlook

With the business potentially at an important milestone, we thought we'd take a closer look at Zai Lab Limited's (NASDAQ:ZLAB) future prospects. Zai Lab Limited develops and commercializes therapies to treat oncology, autoimmune disorders, infectious diseases, and neuroscience. The US$1.6b market-cap company announced a latest loss of US$335m on 31 December 2023 for its most recent financial year result. Many investors are wondering about the rate at which Zai Lab will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

See our latest analysis for Zai Lab

Zai Lab is bordering on breakeven, according to the 13 American Biotechs analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$83m in 2026. The company is therefore projected to breakeven around 2 years from today. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 62%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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We're not going to go through company-specific developments for Zai Lab given that this is a high-level summary, but, take into account that generally a biotech has lumpy cash flows which are contingent on the product type and stage of development the company is in. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Zai Lab has no debt on its balance sheet, which is quite unusual for a cash-burning biotech, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Zai Lab to cover in one brief article, but the key fundamentals for the company can all be found in one place – Zai Lab's company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

1. Valuation: What is Zai Lab worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Zai Lab is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Zai Lab’s board and the CEO’s background.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.